Most of what I read and see regarding China follows the same trend – China is getting bigger and more dominant. Watch out. It seems obvious that is true. Lot’s of people, getting richer, seemingly “effective” government (if production is the only measure). It’s good to have those ideas challenged, because group think is a thing.

Particularly:

“..gross indicators such as GDP and military spending exaggerate the power of populous countries, because they count the benefits of having a large workforce and a big military but not the costs of having many people to feed, police, protect, and serve.”

We (i.e. Westerners) always get China wrong and for obvious reasons. We look at China through the prism of our reality, assuming they view it the same way, have similar domestic conditions, and assuming their own success indicators the same. These very well could be (and probably are) poor assumptions.

China is radically different in the domestic sphere than the US or anyone in Europe. The countries around the US are friendly. The chances of military conflict on the borders are close to zero. There are no territorial disputes and contested shipping lanes. The institutions within the US still run quite well on trust (despite the alarm bells). Domestic security of the population is relatively straightforward. Even in Europe despite the seeming chaos, there is not a huge amount of militarization, and the EU countries mostly run on trust and robust laws.

Around China is not friendly at all. Korea and Japan are both hostile and home to thousands of US troops. China is cracking down on Hong Kong (with resistance), it continues to dispute with Tibet, which is supposedly part of the country. The relations with India are tense, and historically, so are those with Russia. Who knows what is happening in North Korea, but it is clear stability is not. The people in Taiwan are not really into it either, and not showing signs of turning around. A lot of nearby regional countries are taking their money to build stuff and develop, but it is hard to imagine those same countries would remain loyal if that money was taken off the table. This is an unfriendly environment with high, ongoing costs.

I often think about China in aggregation – all those people, all that money and potential for military power. Increasingly, that potential for covert foreign influence. A giant battery of GDP and influence producing power, seemingly loyal to the Country above all. When they are on the list next to the US and sandwiched among European countries, you forget their literal surroundings.

So much of that potential will also always have to be deployed at a local level. There are costs to running a dictatorship – surveillance costs are high, all agreements and processes are less efficient as there is less trust. Business rules can change at any time, which makes everything more risky and less stable.

If you are under Chinese rule, everyone, to some extent, has to watch their back. It’s hard to “trust the system” when very specific government officials are being purged for corruption, and movie stars disappear. This raises costs and inefficiencies. The entire credibility of Chinese “power”, both at home, and abroad, relies on their continuing domestic economic success. That success has to run through their population, plus have enough to spread around to keep their surroundings “loyal”. This is wildly inefficient and potentially a pressure cooker.

Looking at the world in aggregation, China is getting up there. But aggregation doesn’t take into account the details specific to their immediate world. What if the costs of “loyalty” take an increasing share of GDP? What will happen if the economy tanks? In the US and Europe, people get angry – in China, the entire system could collapse.

Aggregation analysis fails to take this stuff into effect. So much analysis will miss the point if it doesn’t attempt to understand what it is like to see the world through the Chinese prism.